Required information The Chapter 7 Form worksheet is to be used to create your own worksheet version of the Review Problem for Activity Based Costing found in the text (include a link of the problem). Download the Applying Excel form and enter formulas in all cells that contain question marks. For example, in cell B26 enter the formula "=B4*B8". Note that the worksheet contains a section at the bottom titled "Determine the Product Margin Under a Traditional Cost System that is not in the Review Problem. In this section, it is assumed that the traditional costing system allocates manufacturing overhead on the basis of the number of units produced. When completed, that part of the worksheet should contain the following results: 52 Determine the product margin for the OfficeMart orders under a traditional cost system Manufacturing overhead $500,000 54 Total activity 1,000 units 55 Manufacturing overhead per unit $ 500 per unit 53 56 57 Sales $ 47,600 58 59 60 Costs: Direct materials Direct labor Manufacturing overhead Traditional costing product margin $ 14,400 4,000 40,000 58,400 $(10,800) 61 62 63 After entering formulas in all of the cells that contained question marks, verify that the dollar amounts match the numbers in the Review Problem. Check your worksheet by doubling the units ordered in cell B16 to 160. The customer margin under activity-based costing should now be $7,640 and the traditional costing product margin should be $(21,600). If you do not get these results, find the errors in your worksheet and correct them. F G I 5% A B C D E 1 Chapter 7: Applying Excel 2 3 Data 4 Manufacturing overhead $500,000 5 Selling and administrative overhead $300,000 6 Assembling Processing Supporting Units Orders Customers Other 8 Manufacturing overhead 50% 35% 10% 9 Selling and administrative overhead 10% 45% 25% 20% 10 Total activity 1,000 250 100 11 units orders customers 12 13 OfficeMart orders: 14 Customers 1 customer 15 Orders 4 orders 16 Number of filing cabinets ordered in total 80 units 17 Selling price $595 18 Direct materials $180 19 Direct labor $50 20 21 Enter a formula into each of the cells marked with a ? below 22 Review Problem: Activity-Based Costing 23 24 Perform the first stage allocations Assembling Processing Supporting 25 Units Orders Customers Other Total 26 Manufacturing overhead ? ? ? ? ? 27 Selling and administrative overhead ? ? ? ? ? 28 Total cost ? ? ? ? ? 29 30 Compute the activity rates 31 Activity Cost Pools Total Cost Total Activity Activity Rate 32 Assembling units ? units ? per unit 33 Processing orders ? ? orders ? per order 34 Supporting customers ? ? customers ? per customer 35 36 Compute the overhead cost attributable to the OfficeMart orders 37 Activity Cost Pools Activity Rate Activity ABC Cost 38 Assembling units ? per unit ? units 39 Processing orders ? per order ? orders ? 40 Supporting customers ? per customer ? customer ? ? 41 42 Determine the customer margin for the OfficeMart orders under Activity-Based Costing 43 Sales ? 44 Costs: 45 Direct materials ? 46 Direct labor ? 47 Unit-related overhead ? 48 Order-related overhead ? 49 Customer-related overhead ? 50 Customer margin ? 51 52 Determine the product margin for the OfficeMart orders under a traditional cost system 53 Manufacturing overhead ? 54 Total activity ? units 55 Manufacturing overhead per unit ? per unit 56 57 Sales ? 58 Costs: 59 Direct materials ? 60 Direct labor ? 61 Manufacturing overhead ? 62 Traditional costing product margin ? 63 ? Required information The Chapter 7 Form worksheet is to be used to create your own worksheet version of the Review Problem for Activity Based Costing found in the text (include a link of the problem). 2. Assume that OfficeMart places orders more frequently, but everything else remains the same. On your worksheet increase the number of orders from 4 to 15. (Prior to completing this requirement, change all worksheet figures back to their original amounts.) B D E A Chapter 7: Applying Excel 1 N 3 4 Data Manufacturing overhead Selling and administrative overhead $ $ 500,000 300,000 5 6 7 Other Assembling Units 50% 10% 1,000 units Processing Orders 35% 45% Supporting Customers 5% 25% 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 10% 20% 250 100 orders customers 12 13 OfficeMart orders: 14 Customers 15 Orders 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 1 customer 15 orders 80 units 595 $ 180 $ 50 (a) What is the customer margin under activity-based costing when the number of orders increases to 15? (Enter a loss as a negative amount.) Customer margin under activity-based costing (b) What is the product margin under the traditional costing system when the number of orders increases to 15? (Enter a loss as a negative amount.) Product margin under the traditional costing system (c) Which of the following statements are true? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will decrease. ? If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will decrease. If a customer orders more frequently, but orders the same total number of units over the course of a year, the customer margin under activity based costing will be unaffected. If a customer orders more frequently, but orders the same total number of units over the course of a year, the product margin under a traditional costing system will be unaffected. ? 3. OfficeMart has found an error in its data. The percentage of selling and administrative overhead attributable to processing orders should be changed to 25% from 45% and the percentage attributable to supporting customers should be changed to 45% from 25%. B D E A Chapter 7: Applying Excel 1 N 3 Data 4 Manufacturing overhead 5 Selling and administrative overhead 6 $ $ 500,000 300,000 6 7 Other Processing Orders 35% Assembling Units 50% 10% 1,000 units 8 Manufacturing overhead 9 Selling and administrative overhead 10 Total activity 11 10% 20% 25% Supporting Customers 5% 45% 100 customers 250 orders 12 13 OfficeMart orders: Customers 14 15 Ord 16 Number of filing cabinets ordered in total 17 Selling price 18 Direct materials 19 Direct labor 1 customer 15 order 80 units 595 180 50 $ $ $ (a) Based on new number of orders in Requirement 2, what is the customer margin under activity-based costing when the data are corrected? (Enter a loss as a negative amount.) Customer margin under activity-based costing (b) Based on new number of orders in Requirement 2, what is the product margin under the traditional costing system when the data are corrected? (Enter a loss as a negative amount.) Product margin under the traditional costing system (c) Which of the following statements are true about what happens when the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answe and double click the box with the question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) ? When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs are shifted from the processing orders cost pool to the supporting customers cost pool. 2 When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, costs will be shifted from customers who order more frequently to those who order less frequently. 2 When the percentage of selling and administrative overhead attributable to processing orders declines and the percentage of selling and administrative overhead attributable to supporting customers increases by the same amount, the customer margins of those who order more frequently will increase relative to the customer margins of those who order less frequently